The Supreme Court of Virginia has been asked to determine if an all-terrain vehicle (ATV) is covered under a homeowner's insurance policy as a "farm-type vehicle," and interpreted the policy as written. The case is Erie Ins. Exch. v. Jones, 2022 Va. LEXIS 21.
In December 2019, Diamond Jones was a passenger on the back of an ATV driven by the daughter of Jennifer and Richard Rekowski. While riding the ATV, a tree branch struck and injured Jones. The incident did not occur on the Rekowski property.
Erie Insurance Exchange (Erie) provided homeowner's insurance coverage for the Rekowskis. Jones sued the Rekowskis and their daughter for her injuries. Erie answered, contending that the policy did not cover the accident. Jones then filed this action for declaratory relief against Erie, the Rekowskis and their daughter, jointly and severally, seeking judgment that Erie was responsible for claim payment. The Rekowskis failed to file an answer and a guardian ad litem for the Rekowskis' daughter filed an answer and endorsed the final order.
Exclusions in the homeowners' policy provided that the policy did not cover "[b]odily injury, property damage or personal injury arising out of the ownership, maintenance or use of . . . any land motor vehicle." An exception to the exclusion exists, though, for vehicles that are a "recreational land motor vehicle not designed for use on public roads while at an insured location; or they are a lawn or farm type vehicle or snowblower, wherever used or located, if not subject to motor vehicle registration…." The policy failed to define "lawn or farm type vehicle." According to the policy, if the vehicle in question is considered to be a "recreational land motor vehicle," then the policy would not cover the accident because it did not occur "at an insured location," while if the vehicle is considered a "lawn or farm type vehicle," then the accident would be covered by the policy.
Expert testimony established that the vehicle in question was a "utility model designed for whatever kind of use the owner has in mind." He said that a towing hitch and various other implements such as push blades, rototillers, or seed spreaders, can be purchased and utilized with the vehicle. The Rekowskis testified that the ATV was very small and was never used as a lawn or farm vehicle and they did not own any attachments for it, nor did they believe that attachments could be utilized. The circuit court concluded that the policy covered the accident reasoning that "lawn or farm type vehicle" was ambiguous and should be construed against the insurer who drafted the contract. The Supreme Court of Virginia disagreed.
The Supreme Court found that a contract is not ambiguous merely because of a disagreement between the parties on the meaning of the terms. The policy excludes motor vehicles from coverage, but an exception to that exclusion provides coverage for a "farm-type vehicle." The evidence established that the ATV could potentially be used either for recreation or for farm usage, making it a multi-use vehicle. A multi-use vehicle is not considered a "farm-type" vehicle unless it is used for farm operations, even if it has farm use capabilities. To read "farm-type vehicle" as encompassing any vehicle that could potentially be used on a farm would create an exception so broad that it would render the coverage limits meaningless since potentially any vehicle could be used for farm-type operations. Therefore, the Supreme Court concluded that as a matter of law, the language "lawn or farm type vehicle or snowblower" does not necessarily encompass a multi-use vehicle like an ATV. The Court concluded that the circuit court erred in denying the insurer's motion for summary judgment and reversed its decision, finding for the insurer.
Editor's Note: Despite a perceived ambiguity, the parties disagreeing on the definition of policy terms does not mean that the policy is ambiguous. Attorneys may attempt to find an ambiguity in the insurance policy language for their clients in order to obtain a defense for an insured, but just because they are undefined does not mean that any of those terms are ambiguous.